our loss is africa's gain

and hopefully it is our gain through exposure to BMN

Robert Gottliebsen - The Business Spectator 03/06/10

Rio Tinto director Rod Eddington last night gave Kevin Rudd the best advice anyone will ever give the Australian Primer Minister start again in negotiating a mining tax and that way you will establish a fair tax. But Rudd was not there to listen.

While Rod Eddington was addressing miners in the Great Hall in new Parliament House, Kevin Rudd was celebrating the Prime Ministership of Andrew Fisher in the old Parliament House.

The big miners are now hardening. If Kevin Rudd wants to negotiate then thats fine, but really this is an issue that has to be decided in an election. For Australias big miners plus Chinese investors, it's now time to put Australia in the too-hard basket for new investment.

When Kevin Rudd and Wayne Swan first announced the tax, I wrote: Over in Guinea they are going to be given the chance of a life time to woo a big chunk of iron-ore investment capital that would have otherwise gone to Australia.

Rio Tinto, BHP and Brazils Vale all have huge iron ore deposits in Guinea. Similarly, Indonesia has a chance to increase the coal market share it has taken from Australia because of our failure to build infrastructure. Similar considerations will apply to [coal-seam] gas (see HENRY TAX REVIEW: Are we pushing BHP and Rio offshore?, May 2)."

What I did not add was that the Chinese have seen the value their investments in Australia ravaged by retrospective taxation. In Africa, they fund many of the governments, so retrospective taxation simply does not happen. We may not like the African system, but its a much safer place to invest for China than Australia, where we take Chinese money and then bash them over the head.

Africa has vast copper, nickel and uranium reserves. Given the clear Australian sovereign risk these deposits may now be developed ahead of Olympic Dam. Fortunately, many Australian mining companies have diversified their interests and are able use their Australian cash flows to invest offshore.

In our sister publication, The Eureka Report, Ivor Ries says that the RSPT has the potential to do more for social development in Africa than the tens of billions sent to Africa through government aid programs over the past three decades.

African assets are becoming more valuable by the day and there are now literally dozens of Australian companies with operations in Africa. African currencies are starting to reflect the looming wealth transfer from Australia to Africa.

The vast investment in Queensland coal-seam gas was always expensive and needed high rewards. But Queensland made sense because big LNG users in Korea, China and Japan wanted to lessen their dependence on the Middle East. But the Australian developments can wait for a decade until Australia is prepared to make it economically plausible to develop them.

Will Rudd start again on the tax? I doubt it. This is an issue that must be decided by the people.